by Steven E. Abraham
For years, business owners have wrestled with a question that seems simple but really isn’t: is a worker an employee or an independent contractor? The answer to that question is extremely important.
I contributed an article to this magazine in September 2021 that addressed the issue but in February 2026, the U.S. Department of Labor (DoL) issued a ruling that makes this an opportune time to address the issue again.
The differences between employees and independent contractors are similar to what they were in 2021:
Employees are covered by a wide range of federal and state employment laws, including minimum wage and overtime requirements under the Fair Labor Standards Act, anti-discrimination protections under Title VII of the Civil Rights Act of 1964 and state statutes such as the New York State Human Rights Law. Independent contractors are generally not covered by those laws.
From an administrative standpoint, employees continue to complete I-9 and W-4 forms, while independent contractors submit a W-9. Employees receive a W-2 at the end of the year, while independent contractors receive a 1099-NEC, if they are paid more than $600 annually. Employers must pay unemployment insurance contributions and Social Security and Medicare taxes for employees while those obligations generally do not...
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